Growth Opportunities Act Passed by German Bundestag: Focus on Promoting Energy Efficiency and Research

On November 17, 2023, the German Bundestag passed the Growth Opportunities Act, a significant move by the Federal Government to strengthen Germany’s competitive position. The law’s main features include transformation premiums to encourage investments and additional depreciation options to boost rental housing construction. The Bundesrat (Federal Council) is set to vote on the law on November 24, 2023.

Investment Premium for Energy Efficiency Measures

The Act aims to improve Germany’s competitive conditions by offering tax incentives for investments in environmentally friendly and climate-friendly technologies. Companies will receive a direct financial subsidy of 15% for energy efficiency measures. This initiative is intended to drive economic transformation and climate protection.

Tax Incentives for Research and Development

To enhance innovation, the law provides a tax incentive for increased research and development. Both personnel and material costs will now be eligible for support. Small and medium-sized enterprises (SMEs) will benefit from an increased funding rate from 25% to 35%.

Simplification of the Tax System

Another goal of the law is to simplify and modernize the tax system to reduce bureaucratic efforts. This includes the temporary reintroduction of declining-balance depreciation for movable economic goods and residential buildings starting October 1, 2023. Improvements in tax loss deductions and an increase in the threshold for low-value economic goods were also decided.

Response to Federal Council’s Suggestions

The Federal Council had proposed over 50 amendments in its first reading of the original bill, of which the Bundestag incorporated some in its resolution.

Further Proceedings

Following the expedited passage by the Bundestag, the Bundesrat will vote on the Growth Opportunities Act on November 24, 2023. The law requires the Federal Council’s approval to come into effect. The Bundestag requested the Bundesrat to waive its usual three-week consultation period, which was agreed upon.